(Token) Game Theory - Part 1 - Launch

Welcome to Issue #10!

I made it to 10! - #SmallWins!

3 new people joined us this week. Howdy!

2 or 3 new people a week doesn't seem like much. But my family gives a little “Woo Hoo!” every time I announce a new subscriber.


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Web3 - ELI5

Doxed - This is when the identity of a previously anonymous or pseudonymous person or team is made known to the public.

Web3 makes it pretty easy (for those who want to) to operate anonymously. Many times a person or team is doxed against their will. This can happen because their project is extremely successful. But in most cases, it’s because they’ve done something bad and the general public wants to know where to assemble with their pitchforks and torches.

When a team doxes themselves willingly, it’s seen as a sign of good faith. It’s meant to help build trust between themselves and their potential customers.


Last week we explored how ERC-1155 tokens could be used to create a token design for a Web3 racing game. This week I had planned to brainstorm some of the ways our game could drive revenue after launch.

But then I got to thinking about the launch itself.

This is such an important part of any project. It deserves a little more attention. And, of course, I have some ideas about how things could be done differently.

Pre-Launch Signaling

In addition to marketing, there are two main concerns we should address before launch. First, we want to alleviate any fears of a rug-pull. Second, we don’t want to be accused of being a Ponzi or an unregistered security.

- Obligatory Disclaimer -

Before we go on, I feel like I should remind you that this is a fictional project. We hired fictional lawyers. If you’re working on a real project, you should hire a real lawyer who understands Web3, NFTs and Crypto so you can get some real advice.

-End Disclaimer-

Back to the game.

We decide the best way to create trust and stay on the right side of the law is to have a fully functioning game on launch. Our NFTs are the access keys to the ecosystem, not a speculative investment in the company. As soon as our users buy their NFTs, they can start racing. In fact, as part of the marketing campaign, we sent out some “Qualifying Passes” to our biggest pre-mint supporters so they could try out the game (and tell everyone else how great it is).

As far as we’re concerned, $FUEL is a utility token that players can use inside the game to buy, sell, and trade NFTs. If they decide to create secondary markets outside the world of our game, that’s their business and their right.

The product is real. The tokens have utility. Let’s sell some NFTs.

Launch

This is where most projects bring in the lion’s share of their revenue. The initial sale of their NFTs brings in a lump sum that can repay the founders and developers for all their hard work.

This is the goal of our launch. so how do we reach our goal in a way that leaves everyone happy at the end of the day?

Let's look at some scenarios.

Scenario 1 - “A La Cart with a Side of Anarchy”

When it comes time to launch, we could release all the NFTs at once. But that would be complete chaos. People who don’t even have a Driver NFT would be minting Cars and Upgrades. And there would be Drivers with no Cars.

People would be pissed. Let’s not do that.

Scenario 2 - “Everything A La Cart, but One Course at a Time”

The first course would be the Driver mint. The current formula dictates that this would be a random mint with traits that appear at different levels of rarity. But we’ve built rarity into the system by limiting the availability of different cars and performance upgrades.

So why not let each user create a custom Driver NFT? It’s not to hard to make this happen. The Song-A-Day DAO is working on just such a concept. When we mint our PFPs we’ll have a chance to choose between several options for the Background, Face, Head Shape and other embellishments. Once a combination of these traits is claimed, it can’t be minted again.

This allows each of the certified members to create a unique membership card in the form of a PFP. It also leaves the door open to adding users in the future without effecting the rarity of each player’s Driver NFT.

Once each player has a Driver, they’ll move on to the Car course. Then the Upgrades... And at the end of the process we’ve made all the basic assets of the game available to the users.

This strategy has its own problems.

  • It feels extractive. We’ve just opened the doors and we’re already nickel and dime-ing our customers. That’s two separate purchases just to get basic access to the game.

  • Mint fatigue. Asking people to return for mint after mint will drain their enthusiasm. And some buyers may get locked out of game-play if they can afford to mint a Driver, but not a Car.

I think we can come up with something better.

Scenario 3 - “All Inclusive”

Why not throw in everything you need to play at the beginning?

Once our users mint their custom Driver NFT, they get airdropped a “Garage” randomly filled with cars, upgrades and an equal share of the in-game currency, $FUEL.

Why would this work to our advantage?

  • It Feels Like a Good Deal - Instead of buying a Driver NFT just to gain the privilege of minting the rest of the assets, you give people access to every feature of the game (even the premium ones) from the start.

  • Kickstart the Game Economy - By giving each player a car, a collection of upgrades, and a little spending money, you’ve given them all the tools they need to start playing the game. And by playing I don’t mean just racing. The car in their garage may not be the one they were hoping for. Or maybe the cosmetic upgrade doesn’t suit them. An equally exciting aspect of the game will be finding and trading for the perfect setup.

  • Royalties - ERC-1155 supports royalties. This is the first source of ongoing revenue. On the surface, giving away all the extras might seem like a lost opportunity. After all, buyers who are content with the NFTs they get from the mint will just head to the track and start racing. And we plan to include few tracks that can be used for free. So this will be the path that some players will take.

    But those extra assets will have value to the other players. If a basic game player doesn’t care about a cool paint job, or is content to drive on the included tracks with a stock Car, they can sell their unwanted Cars and Upgrades on the open market. As drivers trade to build the perfect car, we collect a little off the top to help keep things running.

Loot for Adventurers

If you're skeptical that a strategy like this would work, you should look into the Loot Project by Dom Hoffman.

Loot Bags were a free-to-mint project that were intended to be a seed for an on-chain role playing game. Each NFT contained a randomly generated list of eight items you might find in a fantasy game. It was left up to the community to figure out how they could be used.

And the crowd went wild!

The average sale price of a Loot NFT peaked at just over $75K USD within a week of launch and has since leveled off at around $6000. According to this Dune Analytics Dashboard created by @timshel, the loot ecosystem has generated 5.6 Million Eth in trades since it was launched.

The Loot community has only recently decided to collect a 5% royalty from these trades. If Dom had done this from launch, he could have collected more than 284K Eth or $454 Million USD as of August 2022.

What now?

We built the game. We sold the NFTs. Our players are playing. And thanks to our token design, they’re also trading, which is already generating royalties. As long as the game is played, the royalties will come in. But what started as a flash flood will eventually calm to a gentle stream. It’s going to take more than that to keep the game running.

How will we pay for our web servers? Our community moderators and support staff won’t work for free.

Next week, we’ll explore some of the ways we can build a recurring revenue stream. We’ll look for a solution that makes us happy and adds value to the player experience at the same time.


Thank you for reading all the way to the end.

If you are thinking about launching an NFT project and need help with your token strategy, I’m available for consulting.

Just reply to this email and let me know you’re interested in a call.


This week’s Alpha covers a range of subjects.

  • Frictionless NFT credit card sales

  • Community dashboards

  • Thread on the emerging Community Designer role

  • Legal playbook for DAO token design and how Creators should be thinking about the “Dewey Test”

  • New Web3 Analytics Platform

  • Community engagement in the world of Web3


Getting Meta

Subscriber Count: 68

Total Alpha Claims: 20 (Someone’s been reading the back issues. I’m impressed!)


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